Bacteria Behaviour Can Shed Light On How Financial Markets Work 91
notscientific writes "Bacteria invest in proteins in an attempt to reduce stress or increase energy intake, while humans invest in cash. In both cases, better tradeoffs pay off. The similarities in tradeoffs faced by both bacteria and humans during investment are actually quite similar. Now, using synthetic biology, a group of scientists has shown that the outcomes of investment decisions in bacteria can be precisely defined, alluding to the idea that human investment activities, such as financial markets, can be thoroughly understood as well, and even modelled."
This is a surprise? (Score:4, Interesting)
It makes perfect sense. Both activities involve the same types of selective process that guides evolution in general, be it biological evolution or financial.
Re:This is a surprise? (Score:5, Insightful)
Economists have a history of borrowing scientific theories to explain their field, often overindulging in analogy to the point where the metaphor becomes useless. Consider the following paragraph from the article:
But when bacteria were exposed to acid, something unexpected happened: Those that invested almost nothing into managing stress, and instead favored growth at all costs, succeeded. Gudelj doesn’t yet know the actual mechanism behind this, but she suspects that it’s down to the particulars of the life cycle of the bacteria and its stressor. When taking this analogy to businesses, it appears there are certain types of difficulties for which being nimble and focusing on growth is a better strategy than facing difficulty by trying to manage it.
The author is unable to suggest what these types might be; he simply assumes that the theory is valid and that bacteria must have something to tell us. This kind of growth works for bacteria because they are able to subdivide indefinitely and aren't a monolithic organism. To stretch an already-abused metaphor, the closest example to this kind of growth is creating many similar products or entering a large number of markets to try and find something that works, both of which can be hazardous because of the paradox of choice and loss of investor confidence. Moreover, if a core market collapses, at best all that will be left is the parts of the company that entered the market that succeeded; for bacteria, it's considered "good enough" for a couple of cells to survive, but this is not generally considered acceptable for business. Bacterial survival simply isn't analogous to business success.
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> The author is unable to suggest what these types might be; he simply assumes that the theory is valid and that bacteria must have something to tell us.
They are telling us a very valuable thing! That hindsight is 20-20!
Re:This is a surprise? (Score:5, Interesting)
So if we dip hedge fund managers in acid, they will work harder? Lets tests this, we need a 100k sample size.
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Let's give their environment some stress factors and challenge to help encourage a little spiritual evolution by limiting their income to $7.25 per hour that they're submerged.
They will then need to survive after emerging from the acid bath on that amount. Food, rent, utilities, healthcare.... This will prove that they really are fit to transcend into management, right?
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Economists have a history of borrowing scientific theories to explain their field, often overindulging in analogy to the point where the metaphor becomes useless
I'd take it a step further and say that Economics is pure bunk, and that the subject will have to be renamed. In the future, having a dept. of Economics at a university will be like having a department of Astrology or Phrenology.
First there's the infamous, "let's assume all people are rational" aspect, made no doubt by somebody who had no mother.
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For instance:
The Chinese rare earth fiasco? Easily predictable to anybody with common sense who didn't drink ECON kool-aid and try to apply micro theories to macro situations.
What fiasco? They don't have a monopoly. They are selling below the cost it takes us to extract rare earths, and that benefits us. Seems like every "problem" you seem to have identified in your post are essentially the same sort of thing, where you simply claim that a problem exists based on a "controversy metric" of some kind.
In the real world, not all controversies are a problem. Often they are just dramatized bullshit like the suicide
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After 5 years of research in financial markets and stock markets in particular, yes, this is surprising given the fact that the biggest market movers and shakers are not business outcomes, but more to do with monetary management, as well as policy and regulatory changes.
Anything you "predict" can be overturned by decisions from one or more agents. That scientists and experts fails to recognize hard facts and practical knowledge isn't really surprising though.
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Economics is NOT SCIENCE. why you sk ? simple : NO PREDICTIVE power whatsoever.
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Plenty of predictive power, its the timing that's an bitch.
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What's that you say? Do the assumptions have any empirical validity? Who knows! Why bother testing when you can just write reports on 100k commissions without declaring conflicts of interest!
I like to think of economics as simply a very boring domain of number theory. If we take these arbitrary assumptions, what do the numbers do?
The bad idea was when they forgot they were playing make-believe and started applying their folksy theories to the rea
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And both make the body they're growing in very sick, if they put growth above being social.
Re:This is a surprise? (Score:5, Insightful)
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In this timeline, it's only legal to kill one of those two groups.
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"It makes perfect sense. Both activities involve the same types of selective process that guides evolution in general, be it biological evolution or financial."
We knew they were scum, even if they call themselves biofilm.
It all kind of proves (Score:1)
"Human" nature isn't all that human...
So bacteria have a form of high frequency trading? (Score:2, Interesting)
Re:So bacteria have a form of high frequency tradi (Score:4, Funny)
Re: So bacteria have a form of high frequency trad (Score:2)
Too obvious. (Score:5, Funny)
What's insightful about realizing that one can use disease-causing parasites to model disease-causing parasites?
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What's insightful about realizing that one can use disease-causing parasites to model disease-causing parasites?
maybe you overlooked this:
The similarities in tradeoffs faced by both bacteria and humans during investment are actually quite similar.
can you imagine? similarities are similar!
Behaveour fits (Score:3, Insightful)
Too simple (Score:5, Insightful)
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Of course financial can be modeled... (Score:2)
Maybe...maybe not. (Score:2)
Oh. Well, this explains a great deal. (Score:3, Funny)
Could It Be Possible... (Score:3)
...that investment bankers and stockbrokers are a form of infectious disease?
OK get this (Score:2)
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Not the wisdom of crowds but the wisdom of curd.
FTFY :D
It's all been done...before -- Barenaked Ladies (Score:2, Informative)
> boom and bust cycles
and
> It explains why a single-celled, fat cat investor or Darwinian demon (a hypothetical organism) didn’t win out long ago.
We know why already -- these, along with predator-prey relationships, are all subsets of supply and demand. Differential equation modelling of predator-prey showed stability was, in fact, not possible. Like a breeze across the water, the relative ratios distort a bit, say, the prey become more numerous. The predators increase because the supply of f
market model (Score:2)
Every stock market model that I read about was successful right after a catastrophic event, when everyone in the stock market started to panic. You can model the stock market based on statistical algorithms if everyone in the market behaves rationally. Then a bubble starts to bubble up, then a crash happen, and then everyone panics.
I think the last one was the Black–Scholes–Merton model [wikipedia.org] but there could be more recent ones.
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You can model the stock market based on statistical algorithms if everyone in the market behaves rationally. Then a bubble starts to bubble up, then a crash happen, and then everyone panics.
IMO investors are never behave rationally. To do so they would need to have good information on the businesses they invest in, and this is just not the case. Is there anything worth saving in neoclassic economy theory?
the abstract doesn't mention finance at all (Score:1)
"Understanding how populations and communities respond to competition is a central concern of ecology. A seminal theoretical solution first formalised by Levins (and re-derived in multiple fields) showed that, in theory, the form of a trade-off should determine the outcome of competition. While this has become a central postulate in ecology it has evaded experimental verification, not least because of substantial technical obstacles. We here solve the experimental problems by employing synthetic ecology. We engineer strains of Escherichia coli with fixed resource allocations enabling accurate measurement of trade-off shapes between bacterial survival and multiplication in multiple environments. A mathematical chemostat model predicts different, and experimentally verified, trajectories of gene frequency changes as a function of condition-specific trade-offs. The results support Levins' postulate and demonstrates that otherwise paradoxical alternative outcomes witnessed in subtly different conditions are predictable."
YES both biological and financial systems involve trade-off and evolutionary dynamics. NO those are still not necessarily good analogues for one another......
Yes, I can see that (Score:2)
Both growing and multiplying even if they should know that their host cannot withstand that onslaught and that it will eventually kill off the very thing that feeds them... yes, the parallel is apt.
Everchanging landscape (Score:2)
If there is something that could model the stock market, then everybody would be rich. Since that's not possible, a few people could get rich using an accurate model, but that only works as long as the model isn't used by everybody -- eventually it will fail and many will get hurt.
You can make your model as complicated as you like, using as many variables as you like. If someone else knows you're using it, they can scam you out of your money.
since bankers are slime... (Score:2)
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Why you cannot model a market (Score:2)
You can model this behavior because the participants are not self aware.
With humans, if behavior can be modeled then one or more of the participants can discern that model, and take actions to disrupt it (for profit).
So from the outside a real market with humans in involved is pretty much always going to be an unpredictable chaotic system.
Financial markets are more like lemmings (Score:5, Interesting)
Two points
First slashdot summary tells about financial markets, TFA talks about businesses. I understand that businesses are dwarfs in financial markets, that vast majority of transactions being financial products non based on real economy.
Second, financial markets are more like lemmings than bacterias. They have nasty group behavior that cause all actors to jump into the sea at the same time. Surprisingly, bacterias look to fit neoclassic economy models better than humans, as their decisions seem more rationals.
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Second, financial markets are more like lemmings than bacterias.
There's only one problem with that: lemmings aren't like lemmings [wikipedia.org].
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There's only one problem with that: lemmings aren't like lemmings [wikipedia.org].
Yes, but financial markets are like the stereotype of lemmings.
I can tell you right away (Score:2)
This is bullshit science
I knew traders were low... (Score:1)
... but I had no idea they were single-celled orginisms trapped in a human body!